Short-term rates jumped on Monday as the 2-year and 10-year Treasury yield curves for the first time since the beginning of April.
The measure, which is closely monitored by traders, is seen by many as a bearish indicator.
The gap between the 2-year and 10-year yields fell to at least minus 0.02 basis points on Monday. It comes after Friday’s warmer-than-expected inflation reading raised concerns about an aggressive rate hiking strategy by the Federal Reserve.
The 2-year rate was last seen higher by 15 basis points at 3.201, while the benchmark 10-year rate was trading up nearly 9 basis points at 3.25%. Yields move inversely to prices, and one basis point equals 0.01%.
Their high sensitivity to Federal Reserve rate hikes has led to higher short-term rates increases over the past few days, flattening the widely-observed yield curve.
A much-anticipated Federal Reserve meeting is set to come this week, with the central bank expected to announce a hike of at least half a point on Wednesday. The Fed has already raised rates twice this year, including the most recent 50-basis-point (0.5 percentage point) increase in May in an effort to contain the rise of inflation.
Last week, the US Consumer Price Index, a closely watched inflation gauge, May grew by 8.6% on a year-on-year basisThe Bureau of Labor Statistics reported Friday that it had the fastest growth since 1981. Economists polled by Dow Jones were expecting a gain of 8.3%. The so-called core CPI, which separates volatile food and energy prices, rose 6%.
Meanwhile, consumer sentiment readings from the University of Michigan fell to a record low late last week on spurt in selling in bonds.
No major economic data has been released on Monday.
— CNBC’s Jesse Pound contributed to this report.